LONDON:
The Iraqi cabinet’s recent endorsement of a legal framework for the oil sector removed a key hurdle to foreign investment, but Western oil companies do not expect Baghdad to lure them with giveaway terms.
A consensus has formed on what future oil contracts should look like, oil executives say – despite a backdrop of bickering between Baghdad and the Kurdish authority over control of oil revenues and whether a national oil company should oversee contract negotiations.
Contracts are now expected to be based on formats that set tight limits on the foreign investor’s upside.
“Any deal has to be seen to be fair and in Iraq’s interest, otherwise it won’t last,” said David Horgan, chief executive of Petrel Resources, which is helping the Iraqi oil ministry develop fields in southern Iraq.
Iraq’s neighbours Iran, Kuwait and Saudi Arabia, have been cautious about inviting foreign investment in hydrocarbon exploration, even when the capital and expertise is seen to be sorely needed.
Despite concerns about security and the dilapidated state of its oil and gas infrastructure, oil executives do not expect Iraq to stray far from its neighbours’ example.
Modest expectations, said one source at a Western oil major, meant there was a muted response at his company to the news of agreement on the oil law.
“People aren’t jumping up and down about it,” the source said. “There will be some pretty tough negotiations.”
Majors including Royal Dutch Shell and BP have been studying for three years how they might gain access Iraq’s oilfields, which hold the third largest oil reserves in the world.
Both expect a national oil company to be formed to exploit the country’s reserves, and hope to work with this company.
BP is already helping the Iraqi oil ministry to analyse data from the Rumaila field.
Oil executives say Iraqi officials have indicated that foreign investors will be offered “buyback contracts” for the most promising fields and “production sharing contracts” for riskier prospects.
http://www.oilandgasnewsonline.com/News.asp?Article=21500
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